1. Introduction
a. History and background
The United Arab Emirates (UAE) is a federation of seven emirates
(Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm
Al Quwain).
The currency is the UAE dirham (AED).
b. Legal system
i. Constitution and other laws
In establishing the Federation, the rulers of the seven emirates
agreed on a constitution that provided the legal framework for the
Federation and established Islamic Sharia jurisprudence as the main
(but not the only) source of legislation for the Federation. The
Constitution apportions powers between the federal government
(based in Abu Dhabi) and the governments of the constituent
emirates. The federal government is entrusted with the task of
regulating the principal aspects of the Federation. The governments
of each emirate are authorised to regulate local matters not
confined to the federal government. Accordingly, federal laws and
local laws have been introduced governing most areas of civil and
commercial life in the UAE. In practice, most matters are now
regulated at federal level (with those relating to real estate
being a significant exemption to this), although local
interpretations of federal regulations sometimes differ from one
emirate to another. In the event of a conflict between federal and
local laws, the Constitution provides that the federal law will
override the local law of the emirate, to the extent of the
inconsistency.
The Civil Code and the Commercial Code are the two principal
federal laws that affect day-to-day business life in the UAE, and
these are both based on civil law models, as adopted elsewhere in
the Gulf (and which have their ultimate originals in the Napoleonic
Code), rather than on the common law.
ii. Court system
The Constitution provides for a federal court system, but
acknowledges the right of each constituent emirate to maintain an
independent legislative body and judicial authority. Currently, all
the emirates, with the exception of the emirates of Abu Dhabi,
Dubai and Ras Al Khaimah, are part of the federal court system.
Federal laws that apply to all seven emirates govern rules of
evidence and court procedure.
The federal court system comprises a Court of First Instance in
each emirate and a two-tier appeal system. The federal Courts of
First Instance are trial courts that are located in each major
city. Decisions of one of the Federal Courts of Appeal may be
appealed to one of the Courts of Appeal in the emirate in question,
and a further appeal on matters of law can then be made to the
Court of Cassation in Abu Dhabi. This court also hears any dispute
between the individual emirates, as well as disputes between the
emirates and the federal government. The Court of Cassation is
ultimately responsible for the interpretation of the Constitution
and of the constitutionality of all legislation issued at either
federal or emirate level. The structure of the Dubai court system
largely parallels that of the federal system, except that the
highest court in Dubai is the Dubai Court of Cassation.
The types of courts, which make up the legal framework for each
emirate, are:
- the civil courts
- the Shariah courts, and
- the criminal courts.
Generally, the civil courts have exclusive jurisdiction over
civil, commercial, company, insurance, banking and maritime
matters. The Sharia courts have exclusive jurisdiction in
connection with all family law matters and those relating to
personal status. Both courts have non-exclusive jurisdiction in
respect of criminal proceedings, although, in practice, civil
courts usually hear most criminal matters. The civil courts are
expected to apply, in the following order: first, specific
provisions of federal or local law; second, the provisions of usage
and custom; and third, the principles of natural justice.
All proceedings are conducted in Arabic. Generally, only UAE
national lawyers are permitted rights of audience before the
courts. For evidence to be admissible within the UAE courts, all
documentation must be in the Arabic language or duly translated, or
both. The Arabic translation, if submitted, is deemed to be the
definitive and binding version for the purposes of all proceedings
before such courts. All translations carried out for the purpose of
submittal before the UAE courts must be prepared and certified by a
translator suitably licensed by the UAE Ministry of Justice.
Overall, litigation is often viewed as onerous and can be
unpredictable.
There is no concept of binding judicial precedent or a formal
system of court reporting in the UAE, although an informal system
of precedent does operate in the Federal Supreme Court and the
Dubai Court of Cassation. Therefore, the decisions of a court in
one case will have no binding authority in respect of another.
iii. The Dubai International Financial
Centre
An amendment to the Constitution has allowed the creation of
‘financial free zones’, within the UAE. The key feature of such
zones is that the civil and commercial laws of the UAE are
specifically stated not to apply within them.
Since this amendment, the only such zone that has been
established is the Dubai International Financial Centre (DIFC). The
DIFC has passed a series of its own laws and regulations that are
generally based on common-law principles (rather than the civil law
system, which applies elsewhere in the UAE). The DIFC has its own
court system, which operates in the English language and is
currently headed by a retired English Commercial Court judge.
Among its laws, the DIFC has introduced its own trust law, but
this is able to apply only in relation to business carried out in
or from the DIFC. The DIFC is, however, principally a wholesale
banking market, and only high-net-worth individuals (defined as
those with in excess of USD1 million-worth of free assets) may
become private clients of its licensed institutions. No financial
institution in the DIFC may accept deposits or deal in the UAE’s
own currency, the dirham.
The DIFC has also established its own independent regulator of
financial services within the zone, the Dubai Financial Services
Authority (DFSA). Among other things, the DFSA regulates the
establishment of trust services providers within the DIFC.